A decision released by the FCC’s Media Bureau staff this week makes clear that the permittee of a noncommercial station, who was awarded the permit based on a 307(b) preference, cannot change transmitter sites so as to abandon service to the area that it promised to cover in order to get the preference –
As part of its order in it proceeding to encourage diversity in broadcast ownership, the FCC adopted a number of new rules, including a rule allowing parties holding construction permits for new broadcast stations to sell those permits to "qualified entities." The buying qualified entity would then then get 18 months to construct the new station, even if the construction permit would otherwise expire in less than 18 months. Under prior policy, an FCC construction permit would expire 3 years after it is issued, with no real opportunity for extension (though the construction period could be "tolled" for the period that certain impediments to construction existed, i. e. litigation over zoning, FCC litigation over the validity of the permit, or Acts of God that temporarily stopped construction – but only for the limited period that such an impediment existed). The new rule was adopted to encourage the sale to new entrants to broadcast ownership who could purchase construction permits that might otherwise expire. Today, the FCC issued some clarifications of the new rule.
The clarification was issued principally to set out when the sale must take place in order for the buyer to qualify for the 18 month extension. The FCC’s staff looked at the literal language of the new rule, and concluded that the sale must be approved by the FCC and consummated before the expiration date of the construction permit in order for the buyer to get the 18 month extension. If the sale is not completed before expiration, the permit would expire. Thus, the Commission warned applicants planning to take advantage of this new rule to file for the FCC approval of the sale at least 90 days before the expiration of the permit, to give time for the FCC approval of the sale and a consummation. However, because of the uncertainty of the rule, the Commission decided that it would allow any party wanting to buy an unbuilt construction permit and who files to acquire that permit by May 31 to get the 18 month extension, even if the permit expires while the FCC application for approval of the sale is pending. But after June 1, the buyer will not get the extension if the sale is not completed before the expiration of the permit.
The FCC today released a Public Notice announcing that, after many false starts, it is making effective the new schedule of higher application fees on April 28. We wrote about the on-again, off-again effectiveness of these new fees which, this time, seem quite clearly to be about to become effective. The schedule of new…
At its December meeting, at the same time as it adopted rules relaxing the newspaper-broadcast cross-ownership rules, the FCC adopted new rules to expand diversity in the ownership of broadcast stations, encouraging new entrants into such ownership. The full text of that decision was just released last week, providing a number of specific rule changes adopted to promote diverse ownership, as well as a number of proposals for changes on which it requests further comment. Comments on the proposed changes will be due 30 days after this order is published in the Federal Register. As this proceeding involves extensive changes and proposals, we will cover it in two parts. This post will focus on the rule changes that have already been made – a subsequent post will cover the proposed changes. The new rules deal not only with ownership rule modifications, but also with issues of discrimination in the sale of broadcast stations and in the sale of advertising on broadcast stations, new rules that leave some important unanswered questions.
The rules that the Commission adopted were for the benefit of "designated entities." Essentially, to avoid constitutional issues of preferences based on race or gender, the definition of a designated entity adopted by the Commission is based on the size of the business, and not the characteristics of the owners. A small business is one designated as such by the Small Business Administration classification system. Essentially, a radio business is small if it had less than $6.5 million in revenue in the preceding year. A television company is small if it had less than $13 million in revenues. These tests take into account not only the revenue of the particular entity, but also entities that are under common control, and those of parent companies. For FCC purposes, investment by larger companies in the proposed FCC licensee is permissible as long as the designated entity is in voting control of the proposed FCC licensee and meets one of three tests as to equity ownership: (1) the designated entity holds at least 30% of the equity of the proposed licensee, or (2) it holds at least 15% of the equity and no other person or entity holds more than 25%, or (3) in a public company, regardless of the equity ownership, the designated entity must be in voting control of the company.
In a Further Notice of Proposed Rulemaking, the FCC last week asked for public comment on a series of initiatives to promote the ownership of broadcast stations by minorities and other Socially Disadvantaged Businesses ("SDBs"). These proposals, which include the potential for the sale without requiring any divestitures of clusters of radio stations which exceed the multiple ownership rules now in effect, and the potential for investors to invest in stations controlled by SDBs, even if such investment would otherwise violate the existing multiple ownership rules. The Further Notice was issued in response to a petition filed over a year ago by the Minority Media Telecommunications Council, which asked for a withdrawal of the FCC’s Notice of Proposed Rulemaking on the Multiple Ownership Rules (which we summarized here) because that Notice did not address the promotion of minority ownership of broadcast stations. MMTC claimed that the Third Circuit’s remand of the 2003 Multiple Ownership decision mandated that consideration. Comments on the Further Notice, which will be resolved as part of the current multiple ownership proceeding, are due on October 1, and replies on October 15.
The Notice raises a number of suggestions for regulatory changes to foster the ownership of broadcast stations by minority owners and other SDBs. In addition to allowing the transfer of grandfathered radio clusters that no longer comply with the multiple ownership rules, these include specific proposals that would accomplish the following:
Allowing investment by exiting broadcasters and others with attributable media interests into companies controlled by minorities without the investment being counted against the ownership holdings of the investing company
Allowing minority groups to purchase unbuilt construction permits, and get sufficient time to construct those stations, even if the construction permit is otherwise to expire as it has been outstanding and unbuilt for over three years
Granting some non-minority owned companies waivers to exceed the multiple ownership limits if they sell stations to SDBs (including a proposal to create tradable credits for creating minority-owned stations)
Allowing for the waiver of the alien ownership limits if the investment by foreign companies would assist a minority-owned company in getting into the broadcast business.
Revival of the policies permitting minority distress sales (where a broadcaster against whom there were issues pending which could lead to a revocation of a license could sell their station to a minority group and avoid the revocation proceeding) and minority tax credits (where a broadcaster who sells to a minority group could defer gains on sale if the money was reinvested into any broadcast company in the future)